Personal Finances: A Look at CD Rates and Forex Trading

We probably have never considered making bold financial moves as much as we do now, after an economic crisis that has sent ripples across all facets of modern life. Whether speculating on the foreign exchange market, or making a clever investment that will benefit us greatly over time, we have all become a little more aware of the need to carefully plan our finances.

CD Rates

CDs (certificates of deposit) are a type of financial product offered by various banks and credit unions in the United States. They are considered to be the best type of short- to medium-term investment, and many account holders view them as extra-safe, with no market risk, as they are insured by the FDIC (Federal Deposit Insurance Corporation). They are, in many ways, similar to other savings accounts, with a few distinctions.

The main difference between CDs and other types of money deposits is their fixed term, and the oft-fixed nature of CD rates. However, as most people are on the hunt for the highest interest rates to either supplement their retirement income or assist their kids through college, a number of institutions offer variable interest rates for CDs, depending on the overall state of the economy at the time. If interest rates are predicted to rise over the course of the coming year, some financial institutions may modify the way in which the interest is paid out.

This has led to the creation of various types of CDs in response to investors’ many needs, such as bump-up, liquid, variable-rate, brokered, and callable CDs.

One of the most popular products is the bump-up CD, which allows the client the possibility to increase the rate once during the term of the CD. This is great for the account holder, as the bank can “bump up” the rate on that product to a higher rate offered for that type of investment.

Brokered CDs are provided by brokerage firms which can negotiate higher interests rates for you, and callable CDs give the bank the opportunity to buy back the CD after an established period of time has passed. Liquid CDs have a fixed rate, but they also allow the client to withdraw an amount from the account before its maturity, and, last but not least, variable-rate CDs will calculate the interest you receive upon maturity, based on the outcome of the market index.

While these are all very appealing products with both positive aspects and downsides, a notable way to avoid becoming stuck with a CD that does not offer the desired interest rates is to always be on the lookout for better offers. Banks in other cities or regions can offer interest rates as much as 40% higher than the national average. While this would mean giving up the institution you’ve been banking with, it is also a great opportunity for new investments and development. Before signing any deals, it is important to make sure that the newly found bank is covered by the FDIC and has a good economic history and positive ratings.

Forex Trading

Forex trading is, in simple terms, a global financial market in which the various world currencies compete against each other. Numerous financial centers worldwide provide avenues for trading among a vast range of buyers and sellers, working around the clock to establish the relative values of the different currencies. Forex trading is thus useful in assisting international trade and investments, but also in allowing us to convert one currency to another.

For example, a Forex trader can choose a currency pair they expect to change in value in the future (such as the euro and the dollar), and place a suitable trade. If their predictions are accurate, they should be able to obtain a gain at the time they end the trade. This principle is used by numerous powerful financial players in the global foreign exchange market.